One Major Cause Of Inflation

On Friday, Investor’s Business Daily posted an editorial about inflation. The editorial shows the contrast between inflation in areas of our economy heavily regulated by the government and inflation in areas less regulated.

Here is the chart:

The chart was put together by economist Mark Perry, who tracked the changes in prices over the past 20 years for various goods and services. (Perry’s blog, Carpe Diem, is a must read for anyone looking for clarity on economic matters.)

Note the impact free market capitalism has on inflation–it keeps it under control.

The article concludes:

The ones below the inflation line — many of which actually saw prices decline over the past two decades — are all in highly competitive industries: autos, cellphones, clothing, software, TVs, toys. Two that track inflation, not surprisingly since they account for much of the nation’s spending, are food and housing.

But look at the areas where inflation has been surging: they fall into two broad categories: health care and college education. What do these have in common? Both are subject to massive amounts of government subsidies.

In the case of health care, the federal government now accounts for more than 40% of all health spending. It subsidizes care for the elderly, the poor, and now thanks to ObamaCare, the middle class. Given that health care spending makes up almost one-fifth of GDP, this is a big deal.

As to colleges, federal aid has exploded over the past 20 years, climbing 51% since 1997 — after adjusting for inflation — according to the College Board, which tracks these numbers. Last year, loan subsidies, grants and special tax brakes added up to $113.8 billion.

All that subsidy money was premised on the goal of making these things more affordable. The result is, for many, the exact opposite. By paying most of the tab, the government has insulated consumers from the true cost of these things — a recipe for runaway prices.

Yet instead of dealing with the cause, policymakers keep talking about either adding still more subsidy fuel to the fire, or imposing price controls.

If policymakers want to tackle inflation, the first step would be to review those federal policies that are driving it.

Removing the overabundance of government regulations on businesses is good for everyone. We need to elect leaders who will do that.

The Numbers Are Good, But They Need To Be Better

The American economy is slowly improving. It is not racing along, but it is improving. Investor’s Business Daily recently posted an editorial explaining that although we have a 4.1 percent unemployment rate, we are not yet at full employment. As the article explains, there are other numbers that need to be considered when looking at the economy.

The editorial reports:

But look at the numbers more closely and you see that we are far from full employment.

First, the 0.1 percentage point decline in the unemployment rate in October was almost entirely the result of the fact that 968,000 dropped out of the labor force that month.

That’s right, for every new job created, nearly four people left the labor force.

The broader measure of unemployed — which combines those actively searching for a job with those working part time but want to work full time or are “marginally attached” to the labor force — show the jobless rate to be 7.9%.

And the IBD-TIPP poll shows that there’s likely even more slack than that. The October survey — which asks those polled whether they or anyone in their household is looking for work — shows that the share of job seekers is currently above 10%. This number, by the way, has consistently tracked higher than either of the BLS’s two measures.

Here’s another way to look at it. Back in December 2000, the unemployment rate was 3.9%. But that month, the labor force participation rate — the share of the population that’s either working or looking for a job — was 67%.

The current rate: 62.7%.

If the labor force participation rate were the same today as it was in 2000, the official unemployment rate would be more like 10%.

The 10% unemployment rate would be better than what the actual rate has been in recent years, but obviously, it is not good.

The editorial concludes:

There is clearly still a need for pro-growth policies to get millions of workers sitting on the sidelines back to work.

Those pro-growth policies need to begin with the passage of President Trump’s tax proposal followed by a complete repeal of ObamaCare. If the Republicans in Congress want to be re-elected, they need to do both. It is time to put away the fear of a political outsider succeeding as President and begin to work together to move the country forward.

An article on

An article on the website of the JFK Library includes the following paragraph:

The president finally decided that only a bold domestic program, including tax cuts, would restore his political momentum. Declaring that the absence of recession is not tantamount to economic growth, the president proposed in 1963 to cut income taxes from a range of 20-91% to 14-65% He also proposed a cut in the corporate tax rate from 52% to 47%. Ironically, economic growth expanded in 1963, and Republicans and conservative Democrats in Congress insisted that reducing taxes without corresponding spending cuts was unacceptable. Kennedy disagreed, arguing that “a rising tide lifts all boats” and that strong economic growth would not continue without lower taxes.

I wonder if John Kennedy would be welcome in today’s Democratic party.

 

Taxes Have Consequences

For some unknown reason, politicians love to spend other peoples’ money. And they love to raise taxes to get more of other peoples’ money to spend. However, raising taxes does not always work–sometimes it has unforeseen consequences. The Laffer Curve taught us that.

Last Friday, Investor’s Business Daily posted an article about the soda tax in Philadelphia. It just hasn’t gone as predicted.

The article reports:

That 1.5 cents per ounce doesn’t sound like a lot, but it is. The Tax Foundation notes that it’s “24 times the Pennsylvania excise tax rate on beer.”

“The high tax rate on nonalcoholic beverages makes them more expensive than beer in some cases,” the nonpartisan think tank wrote.

Some people, suddenly facing absurdly high costs for colas, root beers and other soft drink favorites, are turning to alcohol instead.

Probably not what was envisioned with the tax. And the tax has been put on diet drinks as well as sugared ones. So, if they had hoped to alter people’s consumption away from sugar-filled soda toward less-unhealthy, non-sugared alternatives, it was a failure.

Tax increases never sound like much–they are sold that way. Remember the luxury tax that went into effect in 1991 that nearly killed the boat industry. The tax was only supposed to impact the rich, but it caused a serious recession as the impact of the tax began to trickle down.

The article at Investor’s Business Daily further reports:

“Beverage tax collections were originally promoted as a vehicle to raise funds for prekindergarten education,” the Tax Foundation said, “but in practice Philadelphia awards just 49% of the soda tax revenues to local pre-K programs.” The majority of the money goes to government employees’ benefits and local schools that already have funding.

…the tax didn’t bring in the money the city thought it would. The city budgeted a “conservative” $46.2 million in revenues from the tax for fiscal 2017. At current projections, they’ll come up $6.7 million short. Many people are leaving Philly to do their shopping, while others have switched to other beverages, leaving a big unexpected hole in the tax revenue estimates.

“In July, city officials lowered beverage tax revenue by 14%, leaving the prekindergarten programs that the tax promised to fund in jeopardy,” the study said.

Meanwhile, local Coca-Cola and PepsiCo operations laid off nearly 150 workers and pulled some brands off Philly shelves. And angry local businesses are suing the city over the tax.

Raising taxes is never the answer. Cutting spending usually is.

Repeal It Or Go The Way Of The Whigs

Yesterday Investor’s Business Daily posted an editorial about the repeal of ObamaCare. The editorial made some very important points. First of all, the writer reminded us that the demonstrations opposing the repeal of ObamaCare were planned by the Democrats shortly after the election. There are some people who want to keep ObamaCare, but despite what you see on the news, they are a minority.

The editorial reminds us:

Imagine that Democrats announced a health care reform plan that would force millions to cancel health plans and leave the doctors they like, drastically reduce choice and competition in the individual market, cause health insurance premiums to skyrocket, blow billions of taxpayer dollars creating faulty “exchanges” and failing co-ops, leave millions of middle-class families stuck with higher deductibles and higher premiums, cause massive industry losses, slow the economy, cost jobs, and increase the deficit.

Those are the results ObamaCare’s critics predicted and, without exaggeration, what it has produced. Does anyone honestly believe ObamaCare would have ever made it to Obama’s desk if its backers had been honest with the public?

Yes, the uninsured rate has come down, but as IBD noted, the “20 million gained insurance thanks to ObamaCare” claim is a wild exaggeration, and the gains that did occur are entirely due to the expansion of Medicaid — a terrible and financially troubled program — and other government insurance programs, not ObamaCare’s individual market “reforms.”

ObamaCare will implode on its own in a year or so, but the chaos it will leave will take years to undo. It makes much more sense to repeal it before it collapses.

There is another aspect of this mentioned in the editorial–the trust of the voters. First Republicans said, “Give us the House, and we will repeal ObamaCare.” Voters did that, and ObamaCare was not repealed. Then Republicans said, “Give us the House and the Senate, and we will repeal ObamaCare. Voters did that, and ObamaCare was not repealed. Then Republicans said, “Give us the Presidency, and we will repeal ObamaCare.” Well…

During the Obama Administration, Congress took numerous votes to repeal ObamaCare. It was a safe vote–Congressmen knew that President Obama would veto anything that actually got through the Senate, and nothing would happen. Now that a vote to repeal ObamaCare would actually mean something, Congress is stalling.

I have not given up on the repeal of ObamaCare. However, I have pretty much given up on the Republican party. If they choose not to repeal ObamaCare, how are they any different from the Democrats? How can their platform say that they support smaller government and their actions say something else? In plain English, it is time for the Republicans in Congress to put up or shut up.

Giving More Power To The Internal Revenue Service

I suspect that most Americans are big fans of the Internal Revenue Service (IRS). They are something of a necessary evil in sorting out the complex set of lobbyists’ rules that make up our tax code. The have been politicized under President Obama and that may continue under the next President. The last thing we need to do is give them more power, but that is what is happening.

Investor’s Business Daily reported yesterday that the massive transportation bill that a Republican Congress passed this month gives the Internal Revenue Service new powers to authorize the State Department to revoke U.S. passports. Doesn’t that make you feel secure?

The article reports:

But beware: Beginning next year, those living in states that haven’t upgraded their state IDs as federally mandated may need passports to fly domestically.

So if the IRS has an issue with you, you may find yourself kept off the jet that was supposed to take you to spend Thanksgiving with your folks.

Without freedom of movement, this simply isn’t a free country. Standing at the Berlin Wall in 1963, President Kennedy said, “Freedom has many difficulties, and democracy is not perfect, but we have never had to put a wall up to keep our people in, to prevent them from leaving us.”

That has changed. This new rule could well be called “The IRS Wall,” and its express purpose is “to keep our people in” — that is, until they’ve emptied their pockets to the satisfaction of Uncle Sam.

IRS power was already disturbing. Last year, the proprietor of a small, cash-only Mexican restaurant in Iowa, a woman not charged with any crime or suspected of cheating on taxes, saw tens of thousands of dollars seized from her checking account by the IRS without a warrant, just because she made frequent small deposits.

It is time to remind those in Washington that the U.S. Constitution was designed to curtain the power of government–not the freedom of Americans.

The Government Does Not Know How To Run The Healthcare Insurance Business

Yesterday Investor’s Business Daily posted an article about the steep rise in ObamaCare premiums.

The article reports:

Last week, IBD reported that BlueCross BlueShield of Tennessee wants to jack up its ObamaCare premiums by more than 36%; CareFirst in Maryland by close to 30%; and Moda Health in Oregon by almost 50%.

Since then, North Dakota has reported rate hike requests of 43%, Kansas 38% and Iowa 18%.

Insurance companies (and all other companies–even health insurance companies) stay in business because they are profitable. When they stop making a profit, they go out of business. Insurance companies use something called actuary tables to assess risk, set premiums, and maintain profitability. Unfortunately, the people in the government responsible for ObamaCare do not seem to have any idea what an actuary table is–they can’t understand why the premiums keep rising. Meanwhile, the infirm are signing up for ObamaCare and the healthy people who would balance the load are not signing up.

The article concludes:

First, ObamaCare imposes a pile of costly rules and regulations on the insurance industry — mandating generous coverage, outlawing risk rating, and so on.

Then, to cope with these costs, insurance companies employ large deductibles and co-pays to keep premiums within the realm of reasonable.

Now, the same Democrats who created this problem want to force insurers to lower deductibles and co-pays so health care will be more “affordable.”

Never mind that this would, if enacted, produce yet another round of massive premium hikes.

Someone needs to instruct these Democrats on a fundamental truth of economics: There’s no such thing as a free lunch.

Someone might also tell the Democrats that the government has never successfully run anything–much less an industry that is a major part of the American economy.

 

The Need To Learn From Mistakes Made By Other Countries

Investor’s Business Daily posted an article today stating that the Netherlands is changing the rules of its welfare state.

The article states:

The Netherlands has been known for its generous welfare system. Three decades ago, when the U.S. was spending about 22% of its GDP on entitlement programs, the Dutch were spending more than 40%. The Financial Times named the Dutch system a “comprehensive egalitarian social model” built in the 1960s and 1970s.

…Three months ago, newly coronated Dutch King Willem-Alexander told his country that the “classic welfare state of the second half of the 20th century” was over. It would be replaced by a “participation society” because the “arrangements” the nation was operating under “are unsustainable in their current form.”

Among the changes is a requirement that welfare applicants must prove they have actively looked for a job for at least four weeks before they can receive benefits.

“And once they begin to receive benefits they will either have to work or perform volunteer community service,” says the Cato Institute‘s Michael Tanner.

Other savings will be found when youth services, care for the elderly and job retraining are kicked down to the local level, which is better equipped to be more efficient with other people’s money.

The Dutch have learned that those who work cannot support those who do not work indefinitely. Eventually those who work get very tired and decide to join the non-workers. If we do not learn the lesson the Dutch have learned, we can also expect to have to make drastic changes in the near future.

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Hard Facts About ObamaCare

On Wednesday, Investor’s Business Daily posted a chart showing states and companies that have cut staffing levels or working hours because of ObamaCare. The chart only includes companies and states where strong proof is provided.

I can’t even post the chart because it is so long. It is sorted by state, and I strongly recommend that you follow the link above to see the chart for yourself.

The article states:

In the interest of an informed debate, we’ve compiled a list of job actions with strong proof that ObamaCare’s employer mandate is behind cuts to work hours or staffing levels. As of Sept. 25, our ObamaCare scorecard included 313 employers. Here’s our latest analysis, focusing on cuts to adjunct hours at nearly 200 college campuses. The ObamaCare list methodology is explained further in our initial coverage; click on the employer names in the list below for links to supporting records, mostly news accounts or official documents.

We’ll continue to update the list, which we encourage you to share and download into a spreadsheet to sort and analyze. If you know of an employer that should be on the list and can provide supporting evidence, please contact IBD at jed.graham@investors.com.

Keep in mind as you look at this chart that it represents real people with families to support, rents to pay, and financial responsibilities. ObamaCare needs to be stopped. I have no idea how that can be done, but it needs to be done. It will destroy the healthcare insurance industry and the American economy.

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Coming To An Electric Company Near You

On Friday, Investor’s Business Daily posted an article about a change quietly made to energy efficient appliances that could eventually impact all of us.

The article reports:

In a seemingly innocuous revision of its Energy Star efficiency requirements announced June 27, the Environmental Protection Agency included an “optional” requirement for a “smart-grid” connection for customers to electronically connect their refrigerators or freezers with a utility provider.

The feature lets the utility provider regulate the appliances’ power consumption, “including curtailing operations during more expensive peak-demand times.”

So if you are endangering the planet by keeping your beer too cold, the Environmental Protection Agency can save you from yourself.

The article further reports:

So far, manufacturers are not required to include the feature, only “encouraged,” and consumers must still give permission to turn it on. But with the Obama administration’s renewed focus on fighting mythical climate change, we expect it to become mandatory to save the planet from the perils of keeping your beer too cold.

“Manufacturers that build in and certify optional ‘connected features’ will earn a credit towards meeting the Energy Star efficiency requirements,” according to an EPA email to CNSNews.com.

We are both intrigued and bothered by the notion that a utility company, the regulated energy sock-puppet of government, could and probably will have the power to regulate the power we use and how we use it, as long as we’re paying our electricity bills, even to the point of turning these devices and appliances off at will.

This is another really bad example of the nanny state thinking that one size fits all. Have you ever been in a nursing home? It’s generally pretty warm–the senior citizens don’t always have the body composition to stay warm in cooler temperatures. What about people who are sensitive to heat due to a health condition? Will the electric company allow their air conditioners to function at a capacity that will keep them safe?

The appliance manufacturers need to tell the government to go pound sand on this requirement.

Following The Money In ObamaCare

Who makes money in ObamaCare? Not doctors, hospitals, consumers, or health insurance companies, so who is making money and what is it all about?

On Wednesday, John Hinderaker at Power Line posted an article explaining where some of the money the government will take from taxpayers to fund ObamaCare will go.

ObamaCare is not about health care–it’s about politics. The Power Line article used an editorial posted at Investor’s Business Daily on Tuesday as its main source of what is happening to taxpayer money.

Investor’s Business Daily reports:

The Obama administration granted a whopping $910 million to California to set up its insurance exchange. That money is not for bandages, surgery, nurses and doctors to care for the sick. Nor is it for insurance plans, though $910 million could buy generous coverage for at least 113,000 people!

Shockingly, the $910 million is slated for bureaucracy, including rich compensation packages for exchange employees ($360,000 a year for the executive director) and contracts for computer equipment, public relations and “outreach.”

Outreach is the largest expenditure and where the real monkey business occurs.

What in the world is ObamaCare outreach? It seems as if California lawmakers don’t want the taxpayers to be able to answer that question:

Amazingly, California legislators passed a law that the exchange could keep secret for a year who received the contracts and indefinitely how much they were paid. California’s open-records laws would otherwise prohibit such secrecy.

Most of the groups that got the money are not health care related. The include: the California NAACP ($600,000), Service Employees International Union (SEIU) ($2 million), Los Angeles County Federation of Labor AFL-CIO ($1 million),

The article reports:

These organizations, closely allied with the Democratic Party, are being funded by your tax dollars to conduct “outreach,” meaning the kind of phone banking and door-to-door canvassing that activists do to turn out the vote. They will turn out the uninsured to enroll on the exchanges and in the Democratic Party.

The $37 million awarded last month is only the first installment of California’s $190.4 million to be spent on contracts for “outreach” through December 2014.

ObamaCare will create generations of Democrat voters and horrendous health care for everyone. It needs to go away very fast.

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About The Rather Modest Recovery We Are Experiencing

Recently I have heard some Democrats blame spending cuts for the fact that we are in the weakest economic recovery since recoveries began. Investor’s Business Daily has a different perspective. They posted an article today with the following chart:

The article explains:

Instead, the researchers found, “the excess fiscal drag on the horizon comes almost entirely from raising taxes.”

Taxes as a share of GDP are on track to rise well above historic averages and well above rates at comparable periods in previous recoveries.

And what explains this “super-cyclical” rise in taxes?

Well, let’s see. Obama forced through a $600 billion tax hike on upper-income families at the start of this year in the name of “fairness.”

Before that, he and his fellow Democrats imposed $1 trillion of new taxes for ObamaCare, taxes that are just now hitting the economy.

As a result, federal tax revenues as a share of GDP will hit 19.3% of GDP by 2015, a level reached just six times since World War II and well above the 17.9% average over the previous 40 years.

We’d only add that Obama’s other economic policies — an out-of-control regulatory state, the looming disaster known as ObamaCare, various attempts at industrial policy among them — have also weakened what should have been a robust recovery.

Increased taxes have taken spending money out of the pockets of all Americans. Even those people fortunate enough to get raises or bonuses this year found themselves with smaller paychecks because of the increases in taxes. The combination of less spending money for the average American and the confusion many companies are dealing with regarding ObamaCare has stalled our economy. Because many of the regulations in ObamaCare only apply to companies with fifty or more employees, we are going to see many companies stop hiring at forty-nine employees until they are certain of the impact of all these regulations. We are essentially in an economic holding pattern as we wait for the current paradigm of higher taxes and more regulation to settle in. Unfortunately, if that paradigm does permanently settle in, low growth and economic stagnation will be the new normal.

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The Numbers Behind The Jobs Report

Investors Business Daily posted an article today on the latest jobs numbers.

The article reports:

Although somewhat better than expected, the 175,000 net jobs created in May continues the historically tepid jobs growth trend that has come to characterize the now four-year-old economic recovery.

The result has been continued high unemployment, a vast pool of long-term jobless, and an unprecedented number of people who’ve dropped out of the labor force.

The article reminds us that there are 2.4 million fewer people working than there were in January 2008. The Democrats have attempted to blame the slow job growth on sequestration, but that doesn’t make sense. Sequestration did not go into effect until March, and sequestration cut the rate of growth–it did not cut the budget.

The article also points out:

…the total number of government jobs climbed more than 7,000 since January (not including U.S. Postal Service jobs, which get included in government statistics even though the USPS is independently run).

It really is time to shrink the government. It is ridiculous that as the number of people leaving the workforce increase, the government continues to grow.
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What Happens If ObamaCare Is Overturned ?

Last week Investor’s Business Daily asked the question, “What happens if ObamaCare is overturned?” That is a very good question.

It would not be good for Congressional Democrat campaigns–the Democrats spent a year on this bill–were they wasting their time? But what impact would it have on the Presidential campaign? Are there parts of the bill that the public approves of that could be written into law between now and November? Is Congress capable of writing anything into law between now and November?

The article reports:

The KFF survey found that letting 26-year-olds stay on their parents’ policy polled well, with 71% viewing it either very or somewhat favorably. Also polling favorably was prohibiting insurers from denying coverage based on a person’s medical history, 60%, and limiting what insurers can charge older people vs. the young, 52%.

The article then reminds us that these provisions could collapse the insurance market. The thing we need to remember here is that insurance companies are in business to make money. There is nothing immoral about that. If they are allowed to make money, they provide jobs and insurance for people. That’s a good thing. There does need to be some sort of allowance made for a high-risk pool similar to what is done with car insurance, and I would also support something that protects someone from being dropped because they have gotten sick and actually need their health insurance.

What is needed is a fresh start. Such things as insurance portability across state lines, tort reform, and tax breaks for consumers buying individual insurance would be a good beginning. I suspect, however, that any beginning will have to wait until after the November election.

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Two Very Good Articles On ObamaCare On The Internet Today

There are two very good articles on ObamaCare on the Internet today. The first was posted yesterday at Investors.com and the second is in today’s Wall Street Journal. The Supreme Court will begin arguing ObamaCare on Monday.

The Investors.com article points how ObamaCare will increase the cost of medical care and insurance for the people who are insured–not actually lower the cost for anyone.

The article reports:

…By 2019, roughly 16 million people out of the 50 million uninsured will be forced into coverage thanks to the individual mandate. Of those 16 million, some 6 million to 7 million will be covered for the first time by Medicaid and, to a lesser extent, the Children’s Health Insurance Program.

Medicaid, however, provides very low reimbursement rates to participating doctors and hospitals — only 58% of those normally paid by insurance companies. Medicaid often doesn’t pay enough to cover a provider’s costs.

Under the government’s logic, hospitals and doctors will be forced to raise prices for the insured to cover their costs, which will be passed along as higher premiums. The total cost shift under Medicaid is substantially greater than for the uninsured who fail to pay their bills.

Moreover, the increased cost-shifting phenomenon used by the government to justify the individual mandate will only grow worse as Medicaid enrollment expands due to the mandate.

ObamaCare will totally ruin any part of the medical insurance and patient care system that currently works.

The Wall Street Journal article is entitled, “Liberty and ObamaCare.” It deals with the constitutional question of the individual mandate. The article also gives some insight on how the Obama Administration will argue the case:

Consider a White House strategy memo that leaked this month, revealing that senior Administration officials are coordinating with liberal advocacy groups to pressure the Court. “Frame the Supreme Court oral arguments in terms of real people and real benefits that would be lost if the law were overturned,” the memo notes, rather than “the individual responsibility piece of the law and the legal precedence [sic].” Those nonpolitical details are merely what “lawyers will be talking about.”

Does anyone remember the old lawyers’ joke, “If the law is on your side, pound the law; if the evidence is on your side, pound the evidence; if neither is on your side, pound the table.” It sounds as if the Obama Administration plans to pound the table.

Talk radio host Hugh Hewitt (a law professor and practicing lawyer) has promised to highlight the arguments on his radio show (6 pm to 9 pm East Coast Time). I am looking forward to what he has to say.

 

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